Price Reductions on Off-Patent Drugs

The news that the government has negotiated a 40% reduction in prices with the Irish Pharmaceutical Healthcare Association for 300 off-patent drugs (announcements here and here) got the warm fuzzy feel-good treatment on last night’s RTE News at 9 (the word patent did not make its way into the two-minute report).

This is, of course, undoubtedly good news, particularly for those with regular prescriptions for these drugs. Being a dismal scientist, however, I’m always looking for the catch: Is asking nicely for price reductions the way to tackle our budget deficit or are these cuts just an indication that we’ve been paying too much for drugs all along?

The Irish Times newspaper piece by Eithne Donnellan reports about the negotiations between the Minister and the IPHA and then poses a pointed question:

Very quickly the IPHA – which represents all the major drug firms such as Pfizer, Roche, GlaxoSmithKline and Merck Sharp & Dohme – agreed to cut prices of its off patent drugs by 40 per cent if the State didn’t touch the cost of their proprietary or branded drugs for another 18 months. The new deal takes the IPHA up to March 2012, replacing the one due to expire this September.

But if prices could be reduced this much, were the manufacturers of 90 per cent of the drugs on the Irish market just ripping us off all along?

Indeed, this deal comes after another deal struck in 2006 to reduce the prices of these drugs by 35%. So another version of this story is that these deals expose how much money the state has been losing over the years by paying high prices for branded off-patent drugs instead of purchasing generics.

I don’t claim to be an expert in this area, so I’d like to hear from those who know it better. Is this the best we can do or could the state find further savings in this area?

might the narrative run as follows
*we have been over paying for patented drugs and for generics for years
*our usage of generics is way to low
*if you pay your drug costs out of pocket you get screwed by the pharmacists
*our bureaucracy is now finally doing something
*where have they been for all these years?

@yoganmahew: Not quite. Very cheap transport from Ireland to more competitive pharma markets makes some remaining markets smaller. My own experience suggests that in the case of drugs purchased yearly, many people are including it in their holiday plans.

The sole reason these people went along with a 40% reduction was so that the government would continue to purchase branded goods. They were afraid that their bluff would be called and that the HSE would switch over to generic drugs.
They should. Why not if it only to do with packaging?

Only our HSE friends know how much money would be saved but they have become to cosy with these people. Business is business. Will these multinationals give back any of the money they have been overcharging us? Make a donation to Crumlin children’s Hospital for instance?

The public will not see a fraction of the reduction because it is not obligatory that pharmacies pass on the cut. Why have the government left the stable door open in this regard? One can only surmise that it must be deliberate. Either we are pursuing competitiveness issues throughout the economy or we are not. The government don’t seem to mind what happens to ordinary members of the public who buy tablets over the counter on foot of a prescription.

@ Karl – good point. I have been wondering about how the prices are set – it sure does not look like a market when all the pharmaceutical firms club together (I think we have a word for that) and negotiate with just one (or be it the largest) customer (the government).

The same issues seem to apply in other countries – prices appear to be low in the Czech Republic compared to Germany so there is lots of cross border shopping.

Good point. Doesn’t it seem funny how these guys can get together and negotiate this deal with the government, while the Competition Authority told the government that it couldn’t negotiate fees with the Irish Medical Organisation.

I often wondered if conspiracy theory was a creation of the psyche or real I know now that while some of these facts are reflective of the actual, alot are not. Ask yourself why do we have more expensive houses? taxi fares (set by government in a deregulated market)? Medical Consultants on €250K a year not including their private practice which is conducted during their time paid for by us while their UK counterparts get £90K a year? Ireland is like a creche full of spoilt children and no discipline and we all expect too much – taxi fares are related to wages-related to cost of goods-related to house prices- Pharmaceuticals are at least referenced to other European prices through the reimbursement process and are not inflation adjusted – a pack of viagra costs as much now as it did 10years ago. In brief the government are weak and imbued with the same level of entitlement as the rest of us…..

Countries with a sizable drug industry usually pay the price demanded by the industry. Drug company lobbyists are quite effective at using a mix of carrots ad sticks. The basic positions are if your gov’t goes to open tender we will move our facilities to a friendlier environment and our “campaign” contributions will dwindle to nothing. A good example of the different approaches is the US with its “do not mess with the private sector” and Canada “go to tender, open up the doors and let the benefits flow in”. But all is not so simple, the Montreal multinationals isssue the usual threats and the Provincial Government of Quebec backs off on open tenders. Ontario another Canadian province pursues tendering with a vengeance. India in particular and other countries are producing high quality generic drugs which are marketed around the world. Measuring the efficacy of drugs and approving them on the basis of cost and efficacy is particularly threatening to the drug multinationals. Ireland of course is too small to have an effective efficacy program.

@yoganmahew
“Irish consumer’s ability to use the single market to buy drugs from foreign pharmacies? Zero.”
speak for youself. I have five children under 8 which tends to be rather an expensive hobby! Approximately every 2 months I place an order with one of the on-line UK pharmacy retailers and save a fortune. I buy all my OTC medicines this way( paracetamol, zirtec,…..). I have also bought med.s that are on perscription here but are OTC in the UK.
The on-line retailer I use will also fill perscriptions though I have not used this facility.
The stuff is delivered to my door and I save hundreds every year.

@MLucey
For sure with online buying customs can seize your parcels and you will have no redress against them. Google it, there are many cases and complaints about this, but so far, nothing has been done to implement the single market as far as pharmaceuticals are concerned for Irish citizens. YOU are taking the risk with your money in buying this way, YOU may be liable to prosecution.

Like you and Edgar, I also do this on trips to England to visit family…

@ yogan
That would imply that you cant take your prescription medicines with you on holidays?? I am not aware that those that have done cross border shopping have had problems re-entering Germany. I do however think that online pharmacies have been stopped from sending prescription drugs to Germany – presumably the distinction is that when you personally show up in the Czech Republic you are subject to Czech law when you purchase the medicines, whereas your online purchase would be subject to German law. Obviously this only works if you can buy over the counter or if they accept a prescription from your doctor (or you can find a local doctor who will write a prescription).

By the way I am not suggesting that anyone drives to the Czech Republic and fills up a van with whatever to sell over here – clearly that would give rise to problems, since it would no longer be for personal use.

@Edgar
I’ve no idea how it works in other countries. I would be surprised if the restrictive practices of a particular group were enshrined in law they way they are here.

The reason you will be able to bring your prescription drugs back with you is that they will be stamped as approved for use in Ireland.

As I say, I am unclear on whether it is legal to stock up abroad for personal use. The fact that people do it, does not mean that it is not and that customs cannot decide to confiscate/fine/prosecute. Look at the differing rules for dutiable goods even from within the single market.

You are right to ask is this consistent with the warning from the Competition Authority over government negotiations with the IMO.
In each case it is not the actions of the government that are in question, but rather the agreements between distinct undertakings (manufacturerss, doctors, etc) through their associations.

Cheap and easily available. My folks sometimes pick up some mild prescriptions when they’re down there, not on account of the cost per se, but more on the basis that they don’t see the point in having to give their local GP 40 quid few weeks just for the pleasure of him filling out a scrip for them.

Edgar: Yes indeed, for example you can get your asthma inhalers in Spain for a fraction of the cost in Ireland plus you don’t need a prescription. Non-prescription meds & other health related goods here in the US are also a fraction of what it is in Ireland.
You can of course take meds with you on holiday, otherwise tourists would be falling dead in the street.

One possibly minor point that I noticed is that while for the most part the prices generally reflect a “bulk” discount where similar quantities of higher doses of a particular medication, are generally cheaper per unit dose there are some that are a bit odd. I was struck in particular by the Valium pricing – 100 10mg tablets is €4.49 while 100 5mg tablets is €1.43. I can’t figure out how that pricing can be sensible (from the State’s point of view, I can see why the IPHA would like it though).

A few points to be made and a vested interest to be pointed out as I am a pharmacist:

You can import as many prescription drugs as you like as long as you can reasonably show that they are for your personal use, but it is illegal to use mail order pharmacy, and drugs (including OTC drugs) are liable to be confiscated by customs. I suspect that they don’t routinely prosecute as long as the drugs in question are not covered under the misuse of drugs act (valium, morphine, Oxycontin etc).

It is illegal for a pharmacy to advertise it’s prices e.g. a pharmacy can’t have a poster in the window saying “Lipitor 10mg only 19.99” and so this means that it does not make sense for pharmacies to compete on prices if it cannot publicise the fact that it has lower prices. So there is little downward pressure on prices. However, allowing pharmacies to advertise prices freely would essentially mean a de-regulation of prescription drug advertising. Some people would say that drugs should be advertised as any other commodity, but having seen how drugs are marketed in the US, where potentially dangerous drugs, often with only marginally proven benefits are advertised as consumer must-haves (“Take Prozac for peace of mind” kind of thing). I for one think that this would be a bad road to go down.

Despite being the major purchaser of drugs through pharmacies, the HSE has made NO contact with pharmacies to even have the courtesy to tell us that in future they will be paying less for our services. We know nothing about it beyond what is in the public domain. When a large proportion of drugs are reduced in price, this obviously has a huge impact on administration and price adjustment, yet the HSE only released a definitve list of what drugs would be affected 10 days before the proposed reduction. This was far too late to adjust files correctly in time for February, but I expect that the vast majority of pharmacies will pass on the reduction to consumers in March.

I must point out that it is incorrect to say that all off-patent drugs have been reduced by 40%. There are a number of drugs that are off patent, but are not affected as they have no generic equivalent. Others may have a generic equivalent but due to the nature of the drug or the condition they treat are not interchangable. Despite this, some drugs that are not interchangable with their generic equivalent are affected by the reduction. Some drugs with a generic equivalent are not affected for reasons that are beyond me.

The government wants pharma company X to set up here for jobs. They cannot directly actually pay them off, but they can deliberately do a very poor job of negotiating prices. That’s the background, the current situation is simply a case of “That sweet deal has to get a little less sweet because we just don’t have the reddies, and we need some good PR”

@Thriftycriminal – do you realy think that overcharging the Irish health system would convince firms to produce here?? Surely they could overcharge larger countries by less (which is presumably esyer) to get the same benefit. Where is the sense in letting firms that do not produce here – and not all do- overcharge? I would think about this conspiracy theory again.

1. It is perfectly legal to import prescription drugs for your own use.
2. If you have your prescription with you when returning through Irish customs you are proofed against your drugs being seized.
3. It is lawful for Irish doctors to prescribe for up to 6 months supply.
4. In my personal experience French and Spanish pharmacists will gladly fill Irish 6-month prescriptions.
5. I visit France several times each year. Before going I get my 6-month prescription for Nexium, Lipostat, and Amlodipine. When there I buy my drugs. My 6-month supply currently costs €236 in France. This is slightly less than 50% of the cost in Ireland for the exact same drugs (Even the packaging is identical).
6. I have never ever been stopped at airport security or customs or questioned about my big bag of drugs. In any case, if I were I would just show them my prescription.
7. Money spent on drugs anywhere in the EU is eligible for a tax-refund on exactly the same basis as any medical expense incurred in Ireland.

The only way this unpatriotic rip-off will stop is when enough of us vote with our wallets by buying our drugs abroad. Strike a blow for Ireland. Buy your medicines abroad until they bring the prices down to the same levels as apply elsewhere in teh EU.